Deloitte: International shale development will take longer than in US

Vast shale plays worldwide are going to be explored and developed although it’s going to take more than a decade before another country outside the US or Canada can duplicate the current US shale boom, speakers told the Deloitte Oil & Gas Conference on Nov. 13 in Houston.

Chad C. Deaton, Baker Hughes Inc. executive chairman, told some 600 conference attendees that there will be competition from countries abroad to produce unconventional reserves, which he said means that the US needs to retain its leadership role and expertise.

To do this, industry needs to better educate the public and government about the merits of hydraulic fracturing to ensure that unconventional reserves can be tapped aggressively in the future, Deaton said.

“It’s up to us,” Deaton said of industry. “We have to let the government and the public know we are good citizens, we are protectors of the environment and we do create jobs.”

He expects to see shale gas production eventually coming from China, Poland, Mexico, and Saudi Arabia. Saudi Aramco is working with major service companies to bring in hydraulic fracturing equipment, Deaton said, noting that Saudi officials want to use unconventional gas to replace oil to fuel power generation and desalination projects.

Noting projected growing world energy demand, Deaton called upon governments to implement “reasonable regulation” and also called upon industry to continue to improve technology and reduce production costs.

“We have to figure out technically how we can do this differently,” he said. “Technology is the answer.”

Peter J. Robertson, independent senior oil and gas advisor for Deloitte LLP, called US shale development and production “a stimulus program to beat all stimulus programs.”

International shale development

During a media briefing before the Deloitte conference, Robertson said he believes “it’s going to take a long time” for international shale development and production to become significant because other countries do not have the pipeline systems or the unconventional expertise of US oil and gas companies.

“Even 10 years from now, China unconventional production is not going to be that high,” Robertson suggested.

Logistics also are more complicated in some other countries than in the US because of water shortages, land ownership issues, and because some shale reserves are located in populated areas.

When asked by reporters about public concerns regarding hydraulic fracturing, Robertson said, “It’s incumbent on industry to do things very, very well” to ensure that government regulations do not hinder future US unconventional production. He said shale plays are generation jobs for the energy, manufacturing, and petrochemical industries. Robertson formerly was vice-chairman of Chevron Corp.

Deloitte conducted a survey in October of more than 250 oil and gas executives. When asked about regulations, 49% said they believe regulations related to fracing are “just right” or at least on the right track. Meanwhile, 39% of those surveyed said there is “too much regulation.” Another 5% said there was “too little regulation” and 7% said they were unsure.

When asked about shale gas estimates, 51% said current industry estimates are “pretty much on target.”

Roger Ihne, principal Deloitte Consulting LLP, said, “It seems clear that oil and gas professionals believe America has a variable bounty of shale gas resources.” He believes the biggest variable to future gas costs is going to depend upon the nature of government regulations on unconventional exploration and production.